Foreign banks forecast slower growth in 2016

MANILA, Philippines – Citi and Standard Chartered Bank see a slower economic growth for the Philippines this year despite a stronger-than-expected finish last year.

Citi raised its Philippine economic growth forecast to 5.4 percent instead of 5.1 percent this year and to six percent in 2017 but slower compared to the 5.8 percent expansion booked in 2015.

“Amid the global economic slowdown and market volatility, the post-election investment momentum should slow down.  Learning curve effect as the new government takes over weighs on fiscal spending while the business community awaits the new policy agenda,” Trinidad said.

Trinidad said domestic demand is expected to drop below five percent in the fourth quarter from a 7.4 percent growth in the first quarter.

Global demand and investments would remain weak despite the launch of several infrastructure projects under the public private partnership (PPP) scheme, Trinidad said.

“Lacking meaningful 2016 export gains restrain prospects. Investments share of GDP should ease to 23 percent with contribution from ongoing PPP projects and other energy, infra and real estate projects,” Trinidad said.

Trinidad said economic growth is likely to recover in 2017.

“Uncertainty tapering off in 2017 likely enables GDP to resume its historical pace of six percent,” he said.

On the other hand, Standard Chartered Bank economist Jeff Ng said the country’s GDP growth would expand by 5.7 percent this year and six percent next year from 5.8 percent despite the fact the Philippines entered 2016 in a position of strength.

“We are entering 2016 in a position of strength. The Philippines is likely to outperform economies in Asia and Southeast Asia,” Ng said.

Ng said the country would continue to face headwinds if exports and investments underperform this year.

“Private consumption usually improves before the elections and would boost demand for intermediate inputs as well as utilities as well as the wholesale and retail sectors,” Ng said.

Ng sees inflation accelerating to 2.2 percent this year and 2.9 percent in 2017 on the expected increase in the price of oil in the world market toward the end of the year.

Inflation eased to a 20-year low of 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates.

“Inflation is not a huge concern. It will continue to remain modest and muted. In all we believe there is limited downside risk to the economy although there are headwinds ahead,” he said.

Standard Chartered Bank expects the US Federal Reserve to deliver another rate hike this year after raising its near-zero interest rates by 25 basis points last Dec. 16.